TSP Talk Blog

Stocks started the new month on a down note as stocks suffered moderate losses on Monday, although most indices closed well of the lows and the beaten down Dow Transportation Index continues to show signs of life. The Dow lost 92-points, but that was 100-points off the days early afternoon lows, compared to Friday's action where stocks sold off into the close.

The Greek stock market opened down a whopping 30% on Monday (ended down 16%) and China's Shanghai continued its losing ways, so the market seems to have found its new catalysts.

Daily TSP Funds Return More returns

The I-fund led the stock funds, while the S-fund lagged, and bonds had a good day.

We are seeing some signs that the economy may be weakening in the form of the price of oil falling and bond yields dropping. The SPY (S&P500 / C-fund) has not yet shown any signs of faltering but it could easily if certain levels get taken out. I'm seeing a possible inverted head and shoulders pattern, which is usually a bullish pattern.

Yesterday's close was on the positive side as we see a possible "kangaroo-tail" positive reversal day (blue circle.) That pushed it back above the 50-day EMA but we could also see a mirror image pattern forming where the right shoulder could do what the left shoulder did in June. If that's the case, the 206-207 level really needs to hold if it does come down to test last week's lows.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The Dow Completion Index (S-fund) is really struggling. There is a descending resistance line in the area of the 50-day EMA and both are stubbornly holding the small caps back.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The winner recently, at least as far holding up while the other indices are struggling a bit, is the beaten Dow Dow Transportation Index. It's above the 50-day EMA and was one of the few indices yesterday that closed with a gain. The 200-day EMA is an obvious trouble spot so that's the area to keep an eye on should the Transports continue to rise this week.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The falling price of oil could have something to do with the recent rise in the Transports, but we have also talked before about a declining price in oil being a sign of economic weakness assuming that demand could be slipping. It also puts some extra cash in consumer's pockets so I don't know exactly how to resolve this situation.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The EFA (EAFE index / I-fund) was down yesterday despite some strong gains in European markets. Greece's stock market was down as much as 30% at one point yesterday and closed down 16%, but Germany and France both posted solid gains so perhaps Greece doesn't matter?


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The AGG (bonds / F-fund) was up again and the decline in yields (rise in price) is somewhat concerning for the stock market. There is an open gap below that could mean we'll get some short-term weakness in bonds, but the new trend is up... for now.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk


The July Jobs report will be released on Friday. Estimates are looking for a gain of 220,000 jobs, and an unemployment rate of 5.3%. The Jobs Report Contest is open in the forum. Click here for more information.

Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

Thanks for reading! We'll see you back here tomorrow.

Tom Crowley


Posted daily at www.tsptalk.com/comments.php


The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.